Gce Model Questions Vol1 2020 Commerce Question 5
Practice objective / multiple choice question 5 from the 2020 Gce Model Questions Vol1 Commerce examination.
An importer intends to buy goods worth \( €250{,}000 \) in three months. The current spot rate is \( \text{₦}420 \) per \( €1 \) and the three‑month forward rate is quoted at \( \text{₦}425 \) per \( €1 \). If the importer waits, the spot rate at that time is expected to follow a normal distribution with mean \( \text{₦}430 \) and standard deviation \( \text{₦}10 \). The importer wants the probability of paying more than the forward‑contract amount to be less than \(5\%\). Should the importer lock in the forward contract? If the answer is no, state the maximum spot rate (to the nearest naira) that the importer can tolerate while keeping the risk below \(5\%\).
Answer Options
About This Question
This is Gce Model Questions Vol1 2020 Commerce Question 5. It is one of the objective questions from the 2020 Gce Model Questions Vol1 Commerce examination.
Difficulty level: Medium .
Master the Exam!
You've seen a preview, but there are thousands more questions plus AI tutor to break down complex solutions.